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Why Bitcoin, Ethereum and Dogecoin collapsed today

It’s been quite a choppy day in the cryptocurrency world. The entire crypto market is down 3.9% over the past 24 hours, as of 3:00 PM ET, with Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO:ETH)And Dogecoin (CRYPTO: DOGE) lead the way down. These three major tokens are down 4.5%, 5.1% and 7% over the same period, exceeding the losses of the overall market.

In the crypto world, these are three of the most closely watched cryptos, due to their importance to a wide range of investors. As the world’s largest and second largest digital assets, Bitcoin and Ethereum are seen as the industry benchmarks. Most of the value built in this space goes to these two tokens, which currently represent well over half the value of the entire sector. For Dogecoin investors, a lot can be gleaned from the price movements of this meme token regarding sentiment in this sector, especially among speculators.

Let’s take a look at what’s driving this price action today.

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The risk-on rally was supposed to happen this year, right?

Much of the current movement regarding Bitcoin and Ethereum, seen as stores of value, appears to be related to concerns around interest rate cuts and the impact on the US dollar (which has remained very strong over the past month). As the dollar strengthens amid bets that rate cuts will be less (or further away) than expected, that will have some impact on the valuations of these top cryptocurrencies that are benchmarked against the dollar, similar to other commodities.

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Additionally, some concerns about demand for Bitcoin ETFs have caused Bitcoin (and the entire market) to move lower today. The latest data as of April 1 shows net daily outflows from these exchange-traded products of about $1.1 billion, damaging the common thesis that strong demand and an upcoming Bitcoin halving could lead to price overperformance. This could also hurt demand for Ethereum ahead of potential spot ETFs launching for this token, as well as overall institutional capital flows into this digital asset.

Dogecoin’s decline today really needs to be put into perspective as this token hit a new two-year high this week. There is still a lot of hype surrounding the world’s largest meme token regarding an upcoming meme token spinoff and an upcoming launch of futures contracts on Coin base. But as is the case with most daily moves, Dogecoin’s excessive plunge has to do with its nature as a more speculative asset trader that uses it to bet on broader price movements.

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Is the party over?

This crypto rally has been relatively orderly, so investors may want to look at the current decline in these three top tokens from a broader lens. Yes, a 5% to 7% daily decline in any asset is a big move. But in the bigger picture, these higher-risk volatile assets tend to move this way on a regular basis. Therefore, I’m not entirely sure that much can be said about today’s decline putting an end to the strong rally we’ve seen this year. At least not yet.

For now, investors will certainly want to pay attention to incoming macro data and look to ETF inflows as a gauge for how demand for digital assets continues to evolve. I’m not surprised that ETF inflows have slowed in recent days given the run-up we’ve seen so far this year. However, it will be important to see if investors return to this asset class, or if a broader rotation is underway.

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Should you invest $1,000 in Bitcoin now?

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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.

Why Bitcoin, Ethereum and Dogecoin Collapsed Today was originally published by The Motley Fool

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